Download BTI 2016 | Costa Rica Country Report

BTI 2016 | Costa Rica Country Report
Status Index
1-10
8.49
# 12 of 129
Political Transformation
1-10
9.20
# 7 of 129

Economic Transformation
1-10
7.79
# 16 of 129

Management Index
1-10
6.87
# 11 of 129
scale
score
rank
trend
This report is part of the Bertelsmann Stiftung’s Transformation Index (BTI)
2016. It covers the period from 1 February 2013 to 31 January 2015. The BTI
assesses the transformation toward democracy and a market economy as well
as the quality of political management in 129 countries. More on the BTI at
http://www.bti-project.org.
Please cite as follows: Bertelsmann Stiftung, BTI 2016 — Costa Rica Country
Report. Gütersloh: Bertelsmann Stiftung, 2016.
This work is licensed under a Creative Commons Attribution 4.0 International
License.
BTI 2016 | Costa Rica
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Key Indicators
Population
M
4.8
HDI
Pop. growth1
% p.a.
1.1
HDI rank of 187
Life expectancy
years
79.9
UN Education Index
0.654
Poverty3
%
4.0
75.9
Gender inequality2
0.344
Aid per capita $
8.0
Urban population %
0.763
68
GDP p.c., PPP $
14918.1
Gini Index
49.2
Sources (as of October 2015): The World Bank, World Development Indicators 2015 | UNDP, Human Development
Report 2014. Footnotes: (1) Average annual growth rate. (2) Gender Inequality Index (GII). (3) Percentage of
population living on less than $3.10 a day at 2011 international prices.
Executive Summary
In 2014, the country held free and fair democratic elections for the 16th consecutive time, the
longest sequence in Latin America, though within an atmosphere of serious social unrest. For the
first time in sixty years, an electoral force, not heir to the 1948 civil war contenders, gained control
over the executive, within the framework of an intense “anti-continuity” climate. The Citizen
Action Party (PAC), by means of Luis Guillermo Solís Rivera, won the 2014 elections with a
higher urban support base among the middle and upper classes concentrated in the Central Valley.
This result interrupted the rule of the long-term dominant National Liberation Party (PLN) and
instituted a situation in which no large group, but rather an abundance of small and medium-sized
organizations share power. The country has evolved into a fragmented multiparty system within a
presidential democracy framework, a setting which is prone to recurring conflicts among state
authorities and difficulties in coalition-building. In addition, the political campaign coincided with
a prolonged episode of social conflict, and the number of protests during the campaign were the
highest recorded since protests have been registered (1994).
On the socioeconomic level, between 2013 and 2014, the economy grew at a moderate pace with
small periods of acceleration and deceleration, all within a context of low inflation. This growth
was accompanied by failures in the labor market, above all relatively high unemployment (8.5%)
and greater dynamism in the creation of informal jobs. Health, education and public service access
indicators continue to improve, as well as middle family income. However, poverty remains
stagnant at 20%, as it has been for over 20 years, and inequality continues to increase. This trend
is the major challenge to Costa Rica’s historical commitment to social solidarity that the incoming
government pledges to address. Continuing poverty and inequality increase the risk of these
barriers becoming structurally ingrained.
Moreover, this situation coincides with important macroeconomic changes. There was a strong
and converging erosion of the foundations of opportunity, stability and solvency. High internal
costs affected the dynamism of the export sector, key to the country’s economy (without
BTI 2016 | Costa Rica
considering the possible side effects of Intel shutting down operations). The central government’s
deficit reached its highest level in the past 10 years (5.4% of GDP), a situation that is particularly
serious since its main trigger are recurring expenses and not investment. During 2014, inflationary
pressures emerged and exchange rate volatility forced a change towards an administered floating
regime. Within this context, there is very little maneuverability for sustaining the public social
investment growth achieved in recent years. The government has zero margin to confront the
critical fiscal situation, as 95% of its expenses are inflexible, the most rigid profile in Latin
America. Meanwhile, the elected branches of government have repeatedly failed to pass fiscal
reform since the late 1990s (though administrative changes have closed some loopholes and raised
revenues).
In addition, the ecological footprint remains negative. The importance given to clean electricity
generation sources has decreased (use of fossil fuels increased by 44.6%), and conflicts over
environmental issues remain high. In short, despite apparent normality, this period was
characterized by events that implied a break from the past.
History and Characteristics of Transformation
Costa Rica is recognized as the oldest and most stable Latin American democracy. Even among
developing nations, the longevity of its democratic regime is only second to India. For more than
sixty years, since the 1948 civil war, the country has held democratic elections with broad popular
participation and a regular rotation of presidents and parties. One of its key transformation
moments was the adoption of a new constitution in 1949, which evolved during subsequent years
and made the state a key player by entrusting it with the fulfillment of key social, economic, and
(later) environmental rights, while maintaining important areas of the economy, such as banking,
electricity and telecommunications, as state monopolies. It also entrusted the state with the
administration of health, education and housing, as well as a spawning a network of autonomous
institutions. The constitution also abolished the army and, in 1975, made the Supreme Tribunal of
Elections another branch of government.
This constitutional model enabled key accomplishments as it solidified democratic institutions by
enabling and assuring widespread participation and robust political party competition. It also
fostered strong public investments in human and physical capital and the rule of law, which served
as the foundation for the development of the economy. Finally, it made possible the attainment of
high levels of human development, balancing social and economic priorities, reducing poverty and
inequality and protecting the country’s environmental patrimony.
In the last 60 years, disagreements between the legislative and executive branches have never led
to a presidential assault on the political system, allowing Costa Rica to have a consolidated
democracy. Despite this political setting, the country has not been exempt from periods of
economic instability. Internal inconsistencies and adverse international conditions at the end of
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the 1970s pushed the state-centered model into a process of structural reforms during the early
1980s. Significant liberalization took place during this period mainly within the trading sector, in
the form of significant tariff and duty reductions. Privatization was restricted to unprofitable state
enterprises, while state monopolies in banking, insurance, electricity and telecommunications
were left untouched. Only gradually did liberalization advance in these areas, starting with the
banking sector in the 1990s. Strong market-opening strategies attracted foreign investment and
promoted exports. This allowed Costa Rica to diversify its production base, first through
nontraditional agricultural exports and later through high-tech industries clustered in free-trade
zones. Trade liberalization advanced with the ratification of the Central American Free Trade
Agreement (CAFTA), which was approved, after intense public debate, in the country’s first
referendum in 2007. This agreement included a set of laws that called for competition within the
telecommunications and insurance sectors, meaning that the state gave up its monopolies although
its firms have remained competitive against the private sector.
Despite this overall smooth development over decades in a difficult regional environment, Costa
Rica’s political and economic performance has shown some signs of stagnation in recent times.
Over the past few years, social progress has been impaired, with rising social inequality, and
unchanging poverty and extreme poverty levels, driven in large part by deficient financial
management that is undermining the welfare system. In addition, the country’s basic infrastructure
has not been modernized according to the needs of a more dynamic economy. As a result, Costa
Rica’s lead over most of the rest of Latin American countries in basic social and economic
indicators has become less pronounced. Finally, a number of corruption scandals have tarnished
the reputation of traditional parties and caused the collapse of the longstanding two-party system.
This ensemble of factors has generated widespread disenchantment with politics and politicians,
to the point that support for democracy has fallen to its lowest level in the past two decades.
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5
The BTI combines text analysis and numerical assessments. The score for each
question is provided below its respective title. The scale ranges from 1 (worst) to
10 (best).
Transformation Status
I. Political Transformation
1 | Stateness
Citizen security is internationally recognized as a critical problem in the Central
American region and, even though criminal violence in Costa Rica continues to be
comparatively lower than the rest of the region, crime-related activities such as
organized murders, vengeance and drug-related crimes have increased by 50%
between 2003 and 2013. One of the main explanations for this tendency is drug
trafficking and organized crime. Even though the state’s monopoly on the use of force
has not been openly challenged, crime has a higher rate of occurrence in certain
municipalities and specific localities with higher rates of poverty and unemployment.
Six counties (out of 81) and 10 districts (out of 478) reported 40% and 28%,
respectively, of the total number of homicides in 2013. According to the InSight
Crime Foundation, an entity dedicated to studying organized crime in Latin America
and the Caribbean, the county’s homicide rate per 100,000 inhabitants increased from
8.6 in 2013 to 9.5 in 2014. In order to tackle this issue, a series of policies have been
implemented by the state to enhance citizen security by focusing on vulnerable
communities and combining social violence prevention and increased police
presence. Between 2006 and 2013, police enforcement and coordination among
different forces have improved, including the modernization of patrolling operations
and an increase of 50% in the size of the police force, thus enhancing the state’s
response.
Unresolved territorial disputes along Costa Rica’s northern border with Nicaragua
continue to be a source of national concern and international attention, despite being
argued before the International Court of Justice since 2010. The Costa Rican
government acknowledges that the river belongs entirely to Nicaragua, though has
repeatedly filed complaints regarding Nicaraguan workers and military personnel
violating Costa Rica’s sovereignty and causing serious environmental damage on the
right bank of the river where Costa Rican territory begins.
Question
Score
Monopoly on the
use of force
10
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6
The nation-state is widely accepted and not questioned in any form by relevant
groups. There are active social and political sectors that seek to strengthen and
diversify their participatory spaces by means of collective action, such as coordinated
actions among unions (public employees and education), university sectors and
transportation groups, though they do not question the legitimacy of the nation-state.
Residents of isolated and rural areas continue to experience some social and
economic disadvantages compared to their urban counterparts. Nevertheless, this has
not led to protest outside the context of institutional mechanisms. All rights, including
human rights, are recognized throughout the country.
State identity
The Costa Rican state is secular, but there are minor disagreements regarding this
issue. The constitution, though recognizing freedom of religion, establishes Roman
Catholicism as the state religion. This has caused tension between minority parties
with religious ideologies and the ruling party which, together with the left-wing party,
demands the complete secularization of the state. Catholic archbishops and clergy,
together with strong evangelical political parties, have influenced the discussion of
key political issues such as same-sex unions, in vitro fertilization and abortion.
Despite the expiration of the period granted by the Inter-American Court of Human
Rights ordering Costa Rica to reverse its ban on in vitro fertilization, these political
parties, aligned with Catholic conservatives, have strongly opposed the approval of
any related legislation. Furthermore, evangelical political parties, which obtained
four of 57 seats in the legislature in the 2014 elections, tend to form pacts with the
parties that are willing to support them in exchange for support for their own interests,
thus having influence in almost every issue considered by Congress.
No interference of
religious dogmas
At an administrative level, the state continues to be successful in the provision of
basic services on a national scale, particularly health, education, access to drinking
water, electricity and telecommunications. Nevertheless, coordination problems
persist. The policy think tank Programa Estado de la Nación has identified problems
in the design of the administrative structure of the state. There is a complex
institutional apparatus which is difficult to coordinate: 81 municipalities, eight
district councils, and over 280 state entities among autonomous institutions,
decentralized organizations, and the like. In addition, the critical fiscal situation of
the country prevents the continuation of expanding social investment and, if not
properly managed, may detonate an economic and political crisis. Of the total
expenditures budgeted for 2014, 56.9% was destined for the partial implementation
of constitutional and legal mandates, representing an amount on a par with tax
revenues.
Basic
administration
10
9
10
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2 | Political Participation
The two electoral rounds held in February and April 2014 prove that the country has
a robust democratic institutional framework and a citizenry demonstrating active
political interests. According to the Supreme Tribunal of Elections, 68.2% of the
population participated in the first round of the presidential and legislative elections.
The campaign was marked by strong political polarization and several candidate
resignations, though this was not detrimental to its overall quality. The elections
occurred with no disturbance in a context of broad competition, carried out under the
highest democratic standards; they were free and fair elections in a scenario of social
peace. In addition, opportunities for formal citizen participation were expanded with
the application of gender parity and voting from abroad. The electoral results were
accepted without contestation and with a high level of confidence in the work of the
Supreme Tribunal of Elections.
Free and fair
elections
10
The results of the 2014 elections confirm the tendency of the multiparty system
predominating since 1998. The legislature achieved the highest effective number of
parties in history with the representation of nine political parties. In the executive,
citizens opted for change by electing a candidate from the Citizen Action Party (PAC)
to the presidency for the first time – Luis Guillermo Solís Rivera – thus leaving
behind predominant bipartisanship since the 1980s.
Democratically elected political representatives have the effective power to govern,
with no individual or group holding any de facto veto power. Although there are
strong interest groups capable of influencing the course of public affairs, a de facto
form of veto power is not possible. Certain media groups are controlled by potent
business and political elites, who use these means to create and control public opinion
to some extent, thus influencing decision-making processes. Religious groups and the
political parties representing them also have strong influence on these processes, as
they have enough political clout to influence individuals or groups. However, they
are not able to distort democratic procedures. The Constitutional Court plays a very
important role in Costa Rican democracy since no single group can stop the
enactment of decrees or legislation without undergoing due process and obtaining the
declaration of unconstitutionality.
Effective power to
govern
Association and assembly rights are valid without restrictions and guaranteed by the
country’s constitution and Labor Code. Freedom of assembly is proof of this, as it is
unrestricted for individuals and independent of membership in political or civic
groups. Of the 788 registered street protests during the Chinchilla-Miranda
presidential period (2010-2014), protesters reported police repression, including the
use of force and tear gas to disperse crowds, in only a few. New groups, such as
advocates for sexual diversity, the informal transportation sector and
environmentalists have emerged during recent years on the social protest scene,
taking a more belligerent role, but experiencing no discrimination from the
government.
Association /
assembly rights
10
10
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Articles 26-29 of the country’s constitution guarantee unrestricted freedom of
expression for citizens, groups and the media. A broad array of press outlets, from
newspapers to radio, television, and Internet inform citizens and provide multiple
perspectives on the news and current affairs. The country is ranked 16th in the
Reporters Without Borders’ 2015 Press Freedom Index, second in the region only to
Jamaica and ahead of Uruguay, with no journalists, media assistants or citizens
having been killed or imprisoned. The press has played an important role in
demanding public accountability in recent years. Investigative reporting by several
media outlets has exposed bribery scandals implicating high-ranking politicians and
multinational corporations. The International Freedom of Expression Exchange
(IFEX) network states that even though Costa Rica’s current standing is encouraging,
the government has only recently had debates and enacted reforms to some of its
more controversial laws that infringe on freedom of expression and press freedom,
particularly in the area of defamation law. An example of this was the controversial
Information Crime Law proposed during 2012, formerly known as the Gag Law,
which in one article declared prison sentences for the publication of “secret political
information.” The same year, the Costa Rican Supreme Court suspended the article
and the legislature subsequently eliminated the “secret political information” article
altogether.
8
Freedom of
expression
10
3 | Rule of Law
Costa Rica’s constitution establishes that the government is exercised by three
branches: legislative, executive and judiciary. Even though it also states that these
branches are distinct and independent, in practice they are interdependent. Branches
cannot delegate functions outlined in the constitution to one another, but they do
delegate portions of their authority to agencies. Impasses among these powers have
never been the backdrop for a presidential assault on the political system. The system
is designed to assure the separation of powers by reducing the stakes of political
conflict and promoting a consensual style of decision-making. Important policymaking responsibilities are entrusted to autonomous institutions (i.e. health care,
monetary policy, retirement pensions) whose budgets are neither proposed by the
executive nor approved by the legislature. While the legislative is the first branch of
government, growing polarization and party fragmentation have weakened its
decisiveness and complicated relations with the executive. This has increased the
importance of the judiciary, particularly the Constitutional Court, which is charged
with settling jurisdictional disputes between the other powers and interpreting the
constitutionality of the law. The independence of the judiciary was strengthened since
the establishment of the Fourth Constitutional Chamber in 1989 and has become a
decisive interpreter of the authority and boundaries among the branches of
government. The existence of horizontal control mechanisms, through which the
executive and its agencies can be monitored and regulated, is an additional
Separation of
powers
10
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9
component guaranteeing checks and balances in the separation of powers. One of
these key mechanisms is the Comptroller General’s office, which has the broad
mandate to supervise the use of public funds not only on a legal basis, but also with
respect to efficiency and outcomes.
Justice administration takes place through a differentiated autonomous organization
and rational proceedings. The second article of the Organic Law of the Judicial
Branch establishes that this authority is only subject to the constitution, law and its
own decisions regarding matters within its competence. The legislature’s majority
decision rejecting the automatic re-election of a Supreme Court justice in 2012, due
to political partisanship, detonated a conflict that transcended public opinion and
generated a strong discussion on the validity of the arguments backing this decision
and its effects on the independence of the judiciary. The reasons exposed by both
sides for the conflict revealed major differences between senior officials of the two
powers in regards to their respective realms of action. The ruling of the Constitutional
Court, admitting procedural errors in Congress’ decision, was obeyed and the judge
was reinstated for eight more years. Even though the balance sheet disclosed respect
towards the rule of law and democratic institutional framework, this episode brought
an uncommon subject to public debate: the judicialization of politics. This refers to
the non-conformity of other state powers, political parties and other organizations to
the rule of law, as well as alleged abuses and meddling on behalf of the judiciary in
matters of a political nature, actions that usually arise from the practice of settling
governmental affairs in judicial instances. Judicial instances are trusted and their
channels are used by citizens and private corporations. Even though they are not
believed to be corrupt in general terms, cases of corruption and conflict of interests
involving members of the judiciary have lead to questioning with respect to its
independence, particularly regarding local courts. Such was the case in 2014 when a
criminal judge from Limon Province was accused of receiving payments from local
drug lords to rule in their favor in a drug trafficking case.
Independent
judiciary
The Costa Rican government has ratified international treaties, approved laws and
supported watchdog entities against corruption. Citizen awareness and activism has
risen, and all the media have helped uncover corruption cases of high-ranking public
officials (such as former presidents, ministers and mayors). For example, in 2015 a
criminal court sentenced a former Minister of Environment to a three-year suspended
sentence for breach of public duty for favoring the concession of an open-pit gold
mine granted to the British Columbia-based mining company Infinito Gold. Another
case aired to the public was the significant questioning by the media of former
President Chinchilla-Miranda in 2013 for using a private plane belonging to a
Colombian businessman under investigation for his links to drug trafficking. Despite
the resignation of a number of the former president’s senior staff, and a public
investigation by the Public Ethics Inspector, the official report noted that while the
actions taken were clearly ethically questionable, the country’s extensive anticorruption laws did not apply to the president in this case.
Prosecution of
office abuse
9
8
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10
Other important cases have been left unresolved because most of the institutions
involved (courts, the Office of the Public Prosecutor, the Office of the Attorney
General, the Office of the Ombudsman and the Office of the Comptroller General,
among others) are plagued by insufficient personnel and a lack of financial resources,
but, at the same time, are confronted by an increasing and more complex workload.
There is a generalized perception among citizens that public officials are corrupt. The
Latin America public opinion survey Latinobarometro reported that in 2013, the
leading problem perceived by the population was corruption (20%), considered far
more pressing than crime and unemployment.
The 2014 Social Inclusion Index from America’s Quarterly ranks Costa Rica among
the three countries with high respect towards civil rights in the region (the others
being Uruguay and Chile). Civil rights and non-discrimination are guaranteed by the
constitution and enforced through various institutions, such as the Constitutional
Chamber and the Office of the Ombudsman, providing citizens with channels to
present grievances against the state in matters concerning their rights and interests.
Despite the fact that the country ranks second, just below Uruguay, with regards to
respecting women rights, women still face discrimination in the social and economic
realm. Female domestic workers are subject to exploitation; they lack legal
protections, receive the lowest minimum wage, and are excluded from social security
programs. Despite the existence of domestic violence legislation, violence against
women and children is a major problem. According to the policy think tank Programa
Estado de la Nación, cases of domestic violence have increased from 5% of total
cases pursued in the judiciary in 2004 to 7.5% in 2013. The Social Inclusion Index
also shows Costa Rica tied for second to last (11th), along with Guatemala and
Nicaragua, in regard to respect towards LGBT (lesbian, gay, bisexual, and
transgender) rights, placing it in the bottom third of countries surveyed. In July 2013,
the legislature passed the Law of Young People, which some believed created a
loophole for the legalization of gay marriage. However, Family Court ruled that the
language in the bill applied only to unions between a man and a woman. Freedom
House (in 2014) affirms that indigenous rights are not a government priority and
estimates 73% of the country’s 70,000 indigenous people have poor access to health
and education services, electricity and potable water. These groups have voiced
strong concern regarding the loss of culture, contamination of their natural resources,
and deprivation of land tenure – a concern, however, ignored until now by the
corresponding governmental entities.
Civil rights
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11
4 | Stability of Democratic Institutions
Political decisions are effectively prepared, made, implemented and reviewed by
democratic institutions. The 2010-2014 legislative session approved the highest
number of laws since 2002. An abundance of veto players within the state’s
institutional domain has made it more difficult to bring about change within the
system. On the administrative level, the Comptroller General exercises strict financial
and administrative control over the multiple organizations under its purview, which
despite its necessity greatly reduces the flexibility of the executive. On a citizen level,
the Constitutional Court has empowered individuals to appeal administrative action
(or inaction) in every aspect of public service covered by the constitution. On a
legislative level, procedural rules allow minority groups to block the approval of
substantive reforms. More so than ever, legislators submit bills under discussion to
the Constitutional Court for an evaluation of their constitutionality. According to the
policy think tank Programa Estado de la Nación, political fragmentation and
ideological polarization have decreased collaboration between the legislature and the
executive, generating risks in their political performance. The practice of creating
more laws has not ensured the resolution of the main challenges related to human
development. In fact, a quarter of the laws approved correspond to international
conventions and treaties. This trend has been one of the factors hindering the effective
management of public affairs, making it difficult to reach rapid agreements, and
reducing institutional effectiveness and efficiency.
Performance of
democratic
institutions
8
Following the state government, local democratic institutions, particularly
municipalities, play a key role in political delivery in Costa Rica. Consensus
democracy rather than power concentration is the main characteristic in Costa Rican
local government spheres, as none of the main political forces dominate. Their
effectiveness and political reach is questionable, as data from the 2012 Latin
American Public Opinion Project (LAPOP) survey shows that only 10% of the people
interviewed affirmed requesting a service from their local government, of which
three-fourths responded that their request was not met.
The legitimacy of democratic institutions is accepted by individuals, potential veto
actors, and as well by entities and organizations able to concentrate political power,
such as governmental bodies, political parties, associations, interest groups and civic
organizations. Processes of lawmaking and policy implementation are in accordance
with the rule of law. Efficiency problems are the product of the political scenario
previously discussed.
Commitment to
democratic
institutions
10
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12
5 | Political and Social Integration
Costa Rica’s party system is fairly stable even though the degree of political party
fragmentation is increasing, voter volatility is high and political parties lack social
rooting. The democratic system provides the basis for meeting the challenges posed
by a multiparty system and by citizen demands upon the political system. The
problems of political representation within Costa Rican democracy are not
attributable to the multiparty system. A study carried out by the policy think tank
Programa Estado de la Nacion indicates that the weak internal structures of the
political groups are a key factor in understanding this deterioration. While all political
parties lack thorough and up-to-date membership registers, some parties virtually
disappear during non-election periods due to resource shortage: they lack permanent
headquarters outside the capital city; the link between national and local leaders does
not occur through party networks; and their political formation activities, besides
being intermittent, receive little stimulus from centralized structures. According to
the Latin American Public Opinion Project (LAPOP) survey for 2012, only 26% of
respondents said they sympathized with a political party, and 83% of respondents
said they trusted political parties only a little or not at all (an increase from 75% in
2010).
Moreover, Costa Rica showed the Americas’ lowest level of agreement with a
statement asserting that politicians represent citizens (25%) or listen to citizens
(21%). This corresponds with congressional party fragmentation and the level of
polarization evidenced by the formation of alliances. Furthermore, even though
efforts have been made to promote spaces for the participation of various social
sectors (workforces, women and businesses, among others), parties have poor ties
with organized groups in society and generally lack the capacity to represent citizens’
interests. In consequence, the political identity of Costa Ricans is weak and rarely a
determining factor in electoral decisions. This resulted in a scenario of high volatility
in voters’ preferences during the 2014 elections.
The results of the 2014 elections confirm the multiparty format of the country’s
political system. The legislative elections reached the highest level in the effective
number of parties since 1953 (4.92), as well as the highest number of parties
represented (nine). This is the greatest political fragmentation in 61 years. In regards
to the actual results, the vote count revealed that the National Liberation Party (PLN)
obtained 18 seats (the second lowest number in its history); the Citizen Action Party
(PAC) 13 seats; the Broad Front (FA) nine seats (including representation from all
provinces and the highest number of seats obtained by a leftist party); the Social
Christian Unity Party (PUSC) eight seats; the Liberal Movement (ML) four; three
conservative religious parties obtained four seats; and one seat won by a provincial
party controlled by a former leader of PUSC. Citizens voted for change in the
Party system
7
BTI 2016 | Costa Rica
13
presidential elections by choosing a PAC candidate (Luis Guillermo Solís Rivera) for
the first time in history and leaving behind the bipartisanship of the PLN and PUSC,
which has predominated since the 1980s. PAC triumphed in the first round by
surpassing PLN by a little more than 1%, but did not obtain the overall 40%
established by the constitution. This forced a second round in which PAC gained
strong support and was able to succeed by winning 1,338,321 votes (77.8%) against
382,600 votes (22.2%) supporting PLN, the largest margin of victory in Costa Rican
history. This is explained, to a large extent, by the early withdrawal of PLN candidate
Johnny Araya Monge.
Costa Rica has a broad range of interest groups, ranging from social movements and
community organizations to unions and business and professional associations. The
policy think tank Estado de la Nación has identified three basic tendencies from
intense social mobilizations that arose during the Chinchilla-Miranda administration,
which are key in understanding the systemic nature of representative patterns. First,
in many cases a particular group mobilizing for a specific theme was later legitimized
by other sectors, resulting in some form of alliance. In consequence, common fronts
with a wider participation of interest groups were constituted. Second, these alliances
implied the participation, to a greater or lesser degree, of at least four main actors
from the public sector: public employee unions (notably the National Public
Employee Association – ANEP), the National Teachers Society, public universities
and the peasant and farmer sector. There is also strong representation of the private
sector gathered under the UCCAEP (the Costa Rican Union of Chambers and
Associations of the Private Business Sector). While public sector unions are strong
and active, rates of unionization are low (less than 3% of the private labor force is
unionized). And third, contested issues were usually a matter of high social impact,
affecting a broad segment of society. Therefore, there is a broad range of interest
groups that are cooperative and tend to balance one another. No organized
movements seek to undermine democracy or civil society. The majority of social and
political groups strongly defend Costa Ricans’ constitutional rights.
Interest groups
Approval of the democratic system in Costa Rica continues to follow the downward
trend demonstrated in the last couple of years. This reduction deepens a long-term
trend of declining support for the system, which has coincided with the decay and recomposition of the party system, volatility in voter preferences, corruption scandals,
and low levels of political participation. The system support index captured in 2013
by the Latin America public opinion survey Latinobarometro achieved its lowest
level since it was first measured in 1979, reaching 53 points on a scale from zero to
100. In fact, Costa Rica is the country that has suffered the largest drop in democracy
approval in the region, having lost 27 points since 1996. In addition, the same survey
demonstrates a significant reduction in the level of satisfaction with democracy
(35%) and perception of progress (15%), increased support towards authoritarian
alternatives in certain circumstances (increasing from 7% in 1996 to 17% in 2013),
Approval of
democracy
9
8
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14
as well as a noticeable deterioration of confidence and support of the government
(20%) and the president (26%). In terms of approval of government management,
Costa Rica scored 20%, occupying the last place in Latin America where the average
is 49%. Despite all these negative figures, the country ranks second in the region in
terms of overall satisfaction with life (88%).
There is a high level of trust among Costa Rican citizens. According to the Latin
American Public Opinion Project (LAPOP) 2012 survey, nearly 75% of the
population believes that they can trust other members of their community, ranking
among the highest levels of interpersonal trust in the Americas. As an example of
social self-organization, the country has a growing number of non-profit NGOs that
channel funds from different sources (i.e., individuals, groups, companies,
institutions, governments, companies and foreign entities, among others), which are
formed by people providing technical assistance to foster cooperation and support for
a specific cause (i.e. cultural, environmental or social). While the construction of
social capital is supported by the use of social networks, which have developed in
Costa Rica to become a strong means of organizing social mobilizations towards
specific causes, exposing wrongdoings and reclaiming social justice. The 2013 Latin
America public opinion survey Latinobarometro shows that Costa Rica is among the
countries in the region with a comparatively higher daily rate of Internet use (29%)
and use of social networks (48%).
Social capital
9
II. Economic Transformation
6 | Level of Socioeconomic Development
The position of the country in terms of human development remains relatively high,
though with modest performance. Poverty combined with inequality continues to be
among the most serious constraints to economic transformation, posing a risk of
getting structurally ingrained. The country’s score on the UNDP’s Human
Development Index rose slightly from 0.761 in 2012 to 0.763 in 2013, but fell from
62nd position to 68th. According to the policy think tank Programa Estado de la
Nación, insufficient progress in education has contributed to the lower HDI ranking.
Despite efforts to reduce this lag, the population had completed an average of 9.4
years of education in 2013, just 1.6 years more than in 1993, with only 40% of the
population having completed secondary level education in 2014.
The incidences of poverty and extreme poverty have remained close to 20% and 6%,
respectively, since 1994 (scoring 20.7% and 6.4% in 2013). Inequality continues to
become increasingly pronounced. The Gini coefficient obtained for 2013 was 0.524,
Question
Score
Socioeconomic
barriers
6
BTI 2016 | Costa Rica
15
the highest level in decades. Paradoxically, these inequality levels are taking place in
a context of real household income growth for five consecutive years. However, the
benefits of economic growth have been concentrated in the wealthiest groups (fifth
quintile), whose income increased 3.7%, while for the poorest population (first
quintile) income is down by 3.4%. Other indicators also reveal that social inequality
has tended to expand, as the income of the richest deciles rose from 19.2 times that
of the poorest deciles in 2009 to 27 times in 2013. Poverty levels are similar in urban
and rural areas, suggesting an absence of regional exclusion, though inequality is still
higher in rural regions. In terms of gender, the incidence of poverty is higher among
women. Female workforce participation rates have increased steadily, from 35% in
2000 to 36.3% in 2010 and 36.5% in 2013. Despite improvements, evidence shows
that men do better in terms of income and employment. In 2013, the Gender
Inequality Index fell slightly from 0.346 in 2012 to 0.344 in 2013, with Costa Rica
ranking 63rd out of 152 countries.
Economic indicators
2005
2010
2013
2014
19964.9
36298.3
49236.7
49552.6
GDP
$M
GDP growth
%
5.9
5.0
3.4
3.5
Inflation (CPI)
%
13.8
5.7
5.2
4.5
Unemployment
%
6.6
7.3
7.6
-
Foreign direct investment
% of GDP
4.3
5.1
6.7
4.7
Export growth
%
12.8
5.5
3.6
-1.7
Import growth
%
12.4
16.5
2.1
-4.0
Current account balance
$M
-981.0
-1143.2
-2332.6
-2269.8
Public debt
% of GDP
37.5
29.1
36.3
39.7
External debt
$M
6518.7
8546.9
17442.8
-
Total debt service
$M
843.4
1020.1
3014.6
-
BTI 2016 | Costa Rica
16
Economic indicators
2005
2010
2013
2014
Cash surplus or deficit
% of GDP
-
-4.3
-
-
Tax revenue
% of GDP
-
13.4
-
-
Government consumption
% of GDP
13.8
17.7
17.8
17.8
Public expnd. on education
% of GDP
-
-
6.9
-
Public expnd. on health
% of GDP
5.5
7.1
7.4
-
R&D expenditure
% of GDP
-
0.48
-
-
Military expenditure
% of GDP
0.0
0.0
0.0
-
Sources (as of October 2015): The World Bank, World Development Indicators 2015 | International
Monetary Fund (IMF), World Economic Outlook, October 2015 | Stockholm International Peace
Research Institute (SIPRI), Military Expenditure Database 2015.
7 | Organization of the Market and Competition
Market competition is consistently defined and implemented both macroeconomically and micro-economically as property rights are respected, administered
pricing is low, currencies are always traded and the legal system facilitates market
competition. Even though a number of service subsectors that were previously state
monopolies have been opened to competition, the state continues to be very present
in certain service market segments. Opening up processes has been pursued in order
to ensure development of conditions of effective competition. There are stateguaranteed rules for market competition meant to ensure equal opportunities for all
market participants (Law 7472). Article 19 of the constitution grants foreigners the
same rights and obligations extended to nationals. The economy has flourished in
recent years on the basis of foreign domestic investment, whose inflows have
increased at an impressive pace growing on average 13% per year during the last
decade. According to the Organization for Economic Cooperation and Development
(OECD), the legal regime for foreign investors in Costa Rica is more open than
average. The World Bank’s Doing Business Report 2015 shows it takes up to 24 days
to start a new business, just at the world’s average (23 days), though showing
remarkable improvement compared to the 60 days of 2013. The country is ranked
118th out of 185 in the global index in this regard, and 83rd in the overall global
index concerning the ease of doing business. Even though the informal sector is
considered to be small in comparison to other Central and Latin American countries,
figures from the National Statistics and Census Institute show it has increased from
36% to 45% between 2010 and 2013.
Market-based
competition
8
BTI 2016 | Costa Rica
17
Comprehensive competition laws exist in Costa Rica, though they are enforced
inconsistently. In addition to laws ensuring competition (Article 46 of the
constitution; Law 7472), Costa Rica’s National Commission for the Promotion of
Competition (COPROCOM) is in charge of investigating and penalizing
monopolistic practices or any other obstructions to the free functioning of the market.
Public services are comprehensively regulated by the Regulatory Authority for Public
Services (ARESEP), an entity in charge of supervising and overseeing the services
delivered by both public and private providers. The state retains exclusive rights over
alcohol distillation; importation, refinement and distribution of petroleum and its
derivatives; and, in most cases, the operation of railroads, ports and airports. Even
though concessions have begun to be offered to private companies, the regulatory
framework has been subject to several changes and contracts have been plagued by
difficulties. Other key economic sectors were long excluded from competition and
maintained as legal state monopolies. A gradual opening to competition started in the
1980s within the banking sector, while the ratification of the Central America Free
Trade Agreement (CAFTA) and the subsequent passage of its associated laws opened
the insurance and telecommunications sectors in 2008. Some previous state
monopolies were notably affected by CAFTA, though they still retain an important
share of the market. For instance, the state insurance company holds 89% of the
general insurance market share, while in telecommunications the state electricity
company lost roughly 30% of its mobile market and 80% of its mobile broadband
customers between 2010 and 2012. Complaints of anti-competitive practices within
the insurance sector were investigated by antitrust authorities in 2014, who charged
the state insurance company with a fine for discouraging potential competitors from
entering into competition in that market. Liberalizing reforms in the electricity and
telecommunications sectors continue, while antitrust and competition rules are
enforced by the public comptroller known as the Superintendence of
Telecommunications (SUTEL). The electricity sector remains under state control,
though private generation is allowed up to 30% of the market share. The Chinchilla
government desisted from continuing with the project of opening the electricity sector
because of a lack of agreement among stakeholders, unions and interested parties.
Meanwhile, the Solis government announced the creation of a commission that will
take a year and a half to diagnose the problems of the country’s energy sector.
Anti-monopoly
policy
Costa Rica has continued liberalizing its foreign trade regime, mainly through
participation in preferential trade agreements, while at the same time maintaining a
proactive policy of attracting investment. The country can be considered widely
liberalized, with a trade-to-GDP ratio of 74% (2013) and an average weighted tariff
of 3.1% (2010), which implies a strong dependence on international transactions
within the country’s economy. In its Index of Economic Freedom 2015, the Heritage
Foundation reports that the trade-weighted average tariff rate is low, as there are
relatively few non-tariff barriers and the government has upgraded its customs
procedures. However, the country did recently expose itself to sanctions from the
Liberalization of
foreign trade
8
10
BTI 2016 | Costa Rica
18
World Trade Organization (WTO) by exceeding its cap on agricultural subsidies on
rice for several years. As a founding member of the WTO, the country has been an
active participant in multilateral trade system, including the Doha round trade
negotiations. To date, the country has signed free trade agreements with the United
States, Dominican Republic and Central America (CAFTA), the Caribbean
Community of Nations (CARICOM), Canada, Chile, Mexico, Panama, China,
Singapore and Colombia. The European Union and Central America concluded a new
association agreement in 2012, with a trade agreement being provisionally applied in
2013. Relationships with China continue to facilitate exports and promote tourism
following the approval of a free trade agreement (in place since 2011). Discussions
over future Chinese investments in strategic sectors, such as oil refining and tax-free
industrial zones, were discussed in 2015 during a meeting between leaders of the two
countries. Efforts have been directed towards entering the Trans-Pacific Partnership
(TTP), which Costa Rica is one of several countries that has expressed interest in
joining. The country is dedicated to the pursuit of international trade and is aided in
its efforts by two state entities, the Ministry of Foreign Trade (COMEX) and the
Promoter of Foreign Trade (PROCOMER), as well as the private export promotion
office (CINDE).
The banking sector in Costa Rica continues to be dominated by state banks, which
own approximately 65% of total banking assets. Costa Rica’s banking system is solid
and administered according to international standards that include prudent
supervision and capital adequacy requirements. All intermediaries must be registered
and unregulated players are currently rare, though they were a problem in the past.
There are strict disclosure rules and information on market participants is available
to the public. Capital adequacy ratios have normally ranged between 10% to 14%,
reaching 14.8% in 2013, thus surpassing the minimum Basel standards (8%). While
the economic deceleration did affect the payment capacity of borrowers, causing a
slight uptick in arrears since 2009 and continuing through 2013 (where
nonperforming loans reached 1.7% of the total loan portfolio), the effect was still
below the international non-performing loan benchmark of 3%. The financial sector
regulator (SUGEF) anticipated and successfully managed the effects of the global
financial crisis 2007-2008. In its Index of Economic Freedom 2015, the Heritage
Foundation reports that the growing financial sector has gradually become more open
to competition, though state-owned banks continue to dominate the sector and capital
markets are not fully developed. Twelve private banks follow state banks in
importance, including foreign-owned entities, while the rest of the sector is made up
of financial companies, financial cooperatives and two special banks. Despite
advances in cautious regulation, the financial system suffers from high credit spreads
and the difference in yield between public and private bonds of the same maturity, a
sign of inefficiency. The financial depth of the system (measured as the ratio of loans
to GDP: 56.5% in 2013) is relatively high for regional standards and has grown
considerably in recent years (up from 43% in 2005). A number of reforms were
Banking system
8
BTI 2016 | Costa Rica
19
introduced to discourage offshore banking operations and to improve the supervision
of the banking sector that is based on risk.
8 | Currency and Price Stability
Monetary policy has been directed towards consolidating the low inflation rates
maintained since 2009, while exchange-rate policy has been based on the exchangerate band system. In 2013, inflation scored 3.7%. This was the lowest level in
decades, marking five consecutive years of unprecedented single-digit inflation. Price
stability was a result of low inflationary expectations, improved by exchange rate
stability. Since the crawling band system was adopted in 2006 by the central bank,
the alignment of expectations has improved, though it took several years. During
2013, the exchange rate fluctuated around the lower limit of the band with minor
volatility. However, this stimulated a shift towards lines of credits in U.S. dollars and
strong capital inflows that led to currency appreciation. The central bank intervened
in order to defend the band floor from affecting trading on the foreign currency
exchange market (Monex), initiating a new period of volatility and almost certainly
increasing prices. In 2014, the foreign exchange rate detached from the lower limit
of the band and sped the devaluation of the colón, with strong daily oscillations. The
situation is also explained by a convergence of international factors beyond the
bank‘s control.
Anti-inflation /
forex policy
In macroeconomic terms, the economy experienced deceleration in 2013, reducing
its annual rate of GDP growth from an average 4.9% in the last three years to 3.5%,
though this is still satisfactory thanks to the strong performance of domestic demand.
Monetary policy has been consistent in controlling inflation and exchange rate
policies. Exports suffered an important drop, growing only by 3.6% compared to a
growth of 9.5% in 2012. A context of low external demand and currency appreciation
for most of the year contributed to these results. The most dynamic activity was
tourism, which roughly doubled its expansion rate. The withdrawal of Intel from
Costa Rica is beginning to generate a heavy blow on export figures. A continued
current account deficit of nearly 5% of GDP in 2013 was experienced as the volume
of imports grew by 4.1%.
Macrostability
Though Costa Rica managed to weather the global economic downturn in 2009 by
expanding public spending while maintaining financial stability, the country’s fiscal
position has deteriorated since then. Fiscal consolidation is therefore a major concern
for its macroeconomic stability. Governmental budgetary estimates placed the deficit
at 5.4% of GDP in 2013. A containment policy avoided accelerating growth rates of
primary expenditure, though did not reduce it. In addition, Costa Rica maintains a
number of other tax and financial incentive programs to stimulate various productive
and social activities. Without new revenues and given the rigidity of government
spending, growing expenditures also impacted public debt levels, which increased
9
8
BTI 2016 | Costa Rica
20
from 35% of GDP in 2012 to 36% in 2013. Maintaining these imbalances not only
put macrostability at risk, but also the capacity to introduce more opportunities for
the population.
9 | Private Property
Property rights are secure and contracts are generally upheld. Rights and regulations
associated with property acquisition, benefits, use and sale are well-defined and
enforced. Public interest exceptions may lead to an override of these rights, but
always following due processes and with adequate compensation. The Costa Rican
government employs measures to protect the properties of its citizens and foreign
investors. Its constitution includes laws on private land tenure. The government
minimizes ownership restrictions on private land to promote its use for tourism and
commercial purposes. According to the Heritage Foundation’s 2015 assessment of
property rights, contracts are generally upheld and investments are secure in the
country, though the judicial system is slow and resolving a contract-related legal
dispute is quite complicated. According to the International Intellectual Property
Alliance (IIPA), enforcement efforts are missing and copyright piracy remains at
unacceptable levels in Costa Rica.
Property rights
Private companies are viewed as primary engines of economic production and are
given appropriate legal safeguards, backed by the constitution. However,
privatization processes of basic service companies have been disallowed.
Liberalization has been a gradual process over the course of Costa Rican history. The
ratification of the Central America Free Trade Agreement (CAFTA) in 2007 and the
implementation of its complementary laws opened most sectors to competition,
though not through privatization. This means that state enterprises will compete
alongside private companies in telecommunications, insurance and banking, among
other areas. In most cases, the effects of this aperture have ended with state
enterprises continuing to stand as important players and created positive impacts on
economic growth. Government consumption represents 17.9% share of GDP. At the
same time, it is estimated that opening the telecommunications market increased the
share of total foreign domestic investment inflows from 8% in 2002 to 40% in 2012.
The state also has the ability to contract public services to private concessionaries, as
has been done in the context of certain large-scale infrastructure projects such as
airports, ports and roadways. Apart from not being privatized as such, market
openings and concessions largely comply with market principles. However, civil
society groups have repeatedly staged protests against corruption cases within
concession contracts; for example, delays and influence-trafficking investigations
ended with the cancellation of Brazilian company OAS’s roadway concession in
2013. Other alternatives for facilitating investments are still underrated, including
strengthening partnerships between government, universities, R&D and private
sector.
Private enterprise
9
9
BTI 2016 | Costa Rica
21
10 | Welfare Regime
Social investment by the state encompasses universal programs (health and
education), contributive programs (pensions), and selective programs targeted to
vulnerable segments of the population (conditional cash transfers). Universal
programs represent the largest share of public spending (57%), followed by
contributive programs (20%) and selective programs (11.5%), which are growing
very quickly. Universal programs in health and pensions are managed by the
Department of Social Security (CCSS), which is funded mostly through tripartite
payroll contributions complemented by government transfers. Investment in
universal programs just recovered the per capita levels from 2010. The coverage of
universal services is high; about 70% of the economically active population are
covered by health and pension plans, with most of the remaining population covered
as dependants and/or beneficiaries of selective programs.
Social safety nets
8
Despite this, social investment has been insufficient to counter an increase in overall
income inequality, there is no unemployment insurance – though the law requires
employers to pay up to eight months of severance pay to dismissed employees – and
there is still a significant portion of the most vulnerable population that is not covered
by the programs ostensibly targeted toward them. Workers without any compensation
for social risks (14.5% without health insurance from CCSS) work in agriculture,
construction, trade and domestic cleaning.
The financial problems of the CCSS persist, but at least investment in health is no
longer diminishing. A source of concern is the continued expansion of the investment
trust to cover funding for accidents, old age and death pensions (IVM), which affects
financial sustainability. Selective social programs are progressive and effective in
targeting groups, although there is room for improvement. According to the policy
think tank Programa Estado de la Nación 2014, conditional cash transfers reduced
the inequality levels of targeted groups by 1.4 percentage points, according to the
Gini coefficient. Still, it is estimated that 25% of the program’s resources do not reach
the targeted group, mainly those in the middle range.
Costa Rican institutions make an effort to maintain historical achievements in human
development and provide equal opportunity, though progress is slow. Inequality of
income distribution reached historical levels in 2013 (0.524 measured by the Gini
coefficient), revealing that the benefits of economic growth have been concentrated
among the wealthiest groups, while the situation of the poorest population sectors has
deteriorated. Access to health is broad, with a consistent quality of service provided
across socioeconomic levels and geographic areas. Access to education, while
improving, is still far from universal. The average level of schooling achieved within
the population between 18 and 64 years of age is 9.4 years, with only 40% of the
Equal opportunity
7
BTI 2016 | Costa Rica
22
population having completed a secondary-level education. These indicators worsen
with people living in poverty.
Women and members of ethnic or other minority groups have equal access to
education, health and other services. Significant progress has been made in terms of
female participation rates within the labor force (36.5%) and female representation
in politics (33% of legislative seats in the 2014 elections). Despite the established
norm of a minimum of 40% female representation in politically elected seats, this
figure has suffered a reduction in comparison to the 2010 elections (39%) due to
technical differences between vertical parity (within the lists) and horizontal parity
(among the lists in different provinces). However, parity is still elusive and women
still confront various forms of social exclusion. Female-headed households were
identified as the most susceptible to poverty (40%). Similarly, a greater breach within
labor contracts affects the extremely poor, youth, immigrants and disabled people to
a larger extent.
11 | Economic Performance
Considering the macroeconomic data, economic performance is relatively positive.
However, drawbacks in export competitiveness, unemployment and a tendency
towards debt offset output strength. In a context of slow recovery from the 2009
economic crisis, the Costa Rican economy grew by 3.5% during 2013, well below
previous levels (5% in 2010, 4.5% in 2011 and 5.1% in 2012).
This economic slowdown not only had negative impacts on the labor market and the
ability to reduce poverty, but also on competitiveness and social welfare. A moderate
unemployment rate (8.5%) is the highest in the last 15 years. Export competitiveness
in terms of the proportion of products that enter dynamic markets, excluding
microchips and integrated circuits, decreased from 79% to 42% in the 2007-2012
period. Moreover, a moderate and volatile GDP growth has been coupled with a
gradual increase of factor payments made to foreign citizens from capital invested in
the country.
The country’s debt and cash deficit have continued to grow. The gap between
government spending and revenues (including interest payments) reached 5.4% of
the GDP in 2013, while public debt reached nearly 36% of the GDP. The main reason
was a permanent increase in spending as result of the expansion occurring between
2006 and 2010. Besides, tax revenue fell from 13.4% of the GDP in 2010 to 13.3%
of GDP in 2013, as a result of economic contraction. Monetary and exchange rate
stability is improving within a context of low inflation (3.7%), though Costa Rica is
an expensive country compared to the Latin American average in terms of GDP (PPP)
per capita.
Output strength
8
BTI 2016 | Costa Rica
23
12 | Sustainability
Costa Rica has great environmental strengths that are part of its international image
as a responsible and innovative nation in environmental matters. However, the
country is slow and lagging in implementing transformations in the management of
environmental institutions. Conservation continues to be the greatest strength of the
country, which includes preserving more than 26% of its territory under protected
status. Meanwhile, the country continues to be unsustainable in the use of natural
resources from the perspective of its carbon footprint, water management record, and
the sustainability of its economic practices. Raising awareness about these matters
occurred when the release of the 2014 Environmental Performance Index ranked
Costa Rica 54th among 178 countries, after holding the fifth position in 2012. As the
policy think tank Programa Estado de la Nación notes, methodological changes
increasing the number of indicators might explain such a significant drawback in a
short period of time, nevertheless a shocking warning.
Environmental
policy
7
Despite the expansion in forest coverage from 51.4% of the territory in 2005 to 52.4%
in 2013, continued patterns of energy consumption based on highly contaminating
hydrocarbons result in greenhouse gas emissions that outpace the country’s
absorption capacity. Nevertheless, the Ministry of Environment declared in 2014 that
Costa Rica is within 19% of its goal of becoming carbon neutral by 2021. To make
this even more difficult, the use of fossil fuel sources for electricity production
increased 44% between 2012 and 2013, triggered by a reaction to dependence on
hydroelectricity, which has been vulnerable to changing weather patterns in recent
years. In addition, the country continues to provide little attention to its lack of
wastewater management. Political controversy remains concerning Environmental
policy in 2013. The policy think tank Programa Estado de la Nación remarks that in
the last decade, environmental motivations for social protest grew from 1.8% (as a
share of all cited reasons for protest) to 7%, reaching the highest level in the last four
years.
Education is a key component of social policy, with preschool and general basic
education (until the ninth grade) obligatory, universal and free, and public budget for
education at all levels constitutionally mandated at a minimum of 6% of GDP (Article
78). As a result, literacy rates exceed 97% within the population aged 15 years and
over, and there is a complex institutional network devoted to education at primary,
secondary and tertiary levels. While universal coverage has been achieved at primary
level, only 85% of the eligible population (ages 13 to 17) is enrolled at the secondary
level, and dropout rates are close to 9.3% (2014). These are improvements from 2012
(83.9% and 10.2%, respectively), which demonstrate a positive response to a
conditional cash transfer program (Avancemos) designed to keep students in high
school. Recent administrations have also increased spending in education in
Education policy /
R&D
7
BTI 2016 | Costa Rica
monetary terms and as a percentage of the GDP, approaching 7.3% in 2013. During
the same year, the population had an average of 9.4 years of completed education,
slightly higher than the level in 2011 (8.9 years), but just 1.6 years more than in 1993.
The percentage of the population that is economically active with complete secondary
education reached 44% in 2013, a positive result compared to 28% in 1993, but
insufficient for a country that focuses on the development of technology and
productivity. Moreover, investment in research and development remains low, barely
0.5% of GDP. The Economic Commission for Latin America (ECLA) recommended
that Costa Rica increase investment in innovation from the private sector and
spending from the public sector, redirecting existing resources from other ministries
to the promotion of R&D programs.
24
BTI 2016 | Costa Rica
25
Transformation Management
I. Level of Difficulty
Stagnant poverty rates and deterioration in basic and social infrastructure and
services are the main structural constraints on governance capacities. Though still
remaining moderate, their persistence is troublesome, affecting the governance
capacity of political leaders. Costa Rica suffers an impasse in poverty levels, as the
20% figure has been stagnant for over 20 years, regardless of increased social
spending and new redistributive social policies. Furthermore, the deterioration in
education, social security and infrastructure are also producing social fragmentation
and increase the level of difficulty for governance. Although the country has taken a
stand concerning the quality of primary education, it has an accumulated deficit in
secondary school infrastructure and there are existing gaps between the education
being offered, scientific and cultural development, and the demands of the labor
market. Moreover, an aging population and chronic degenerative diseases affecting
the population segment without adequate health care are putting pressure on the need
to increase coverage and the quality of universal health and pension programs
managed by the Social Security Institute (CCSS). One of the greatest challenges the
country faces is the maintenance and modernization of large-scale infrastructure
projects such as airports, ports and roadways. Investments in this area have not kept
pace with economic growth, while effective and independent audits of public
infrastructure have failed repeatedly, generating substantial delays to users and high
financial costs assumed by the state.
Structural
constraints
Costa Rica has a plurality of community, labor, business, cultural, religious and
recreational associations. The participation of persons in these civil society
organizations is not based on intimidation, legally sanctioned corporatism or political
clientelism. There are about 19,500 civic associations, 243 unions, 725 cooperatives,
close to 1,300 solidarist associations, and more than 3,300 community development
associations registered in the country (as of 2011). However, an undetermined
number of these organizations operate informally, without being registered by the
corresponding public institutions and there are no precise records regarding the
number of affiliates. Social organizations reveal important sub-national differences,
as community and producer associations predominate in rural counties, whereas labor
unions and solidarist associations are concentrated in urban centers and banana-
Civil society
traditions
4
2
BTI 2016 | Costa Rica
26
producing areas. There is a high level of trust among citizens. According to the 2012
Latin American Public Opinion Project (LAPOP) survey, nearly 75% Costa Ricans
believe that they can trust other members of their community, ranking among the
highest levels of interpersonal trust in the Americas.
There are no violent conflicts based upon social, ethnic or religious differences. There
is great public scrutiny of public institutions. Society demands more and better
explanations from democratic institutions, provoking political deliberation and
strengthening social control over the state. Social tensions and economic policy
issues have been expressed through a larger than average amount of protest in the
past two decades. During the Chinchilla-Miranda presidential period (2010-2014),
there were 888 street protests, surpassing the 500 mark only for the second time in
history. On average, a third of collective actions corresponded to street protests.
Police repression, including the use of force and tear gas to disperse crowds, was
reported in few cases. The high level of mobilization proves that different sectors and
societal groups (such as unions of public employees and educators, university sectors
and transportation associations) prefer supporting collective action in order to be
heard by politicians, rather than employing institutional mechanisms. Their demands
continue to be diversified, including calls to improve the health, education and
infrastructure sectors.
Conflict intensity
1
II. Management Performance
14 | Steering Capability
The government sets and maintains strategic priorities. However, it encounters
obstacles. The political agenda of the presidency is defined at the beginning of each
administration through a binding national development plan (Plan Nacional de
Desarrollo) that contains detailed goals and objectives for all government institutions,
divided according to sectors and regions. Strategic priorities have been aligned with
an effort to improve the institutions of democracy and a socially inclusive market
economy. On a longer-term perspective, the central pillars of the plan are set on
emphasizing social well-being, sustainable development, and competitiveness and
innovation. Public security and the fight against corruption have been incorporated
in the political agenda in response to emerging threats.
In terms of concrete policies, at the beginning of the Chinchilla administration (20102014) the government indicated that it would prioritize fiscal reform and citizen
security. In terms of expenditure, infrastructure development and anti-poverty efforts
were the main priorities on the national agenda. However, particularly after a tax
Question
Score
Prioritization
9
BTI 2016 | Costa Rica
27
reform bill was dismissed in 2012 by the Constitutional Court due to procedural
errors, these priorities were superseded by measures aimed at containing the
country’s growing fiscal deficit. Although postponing important social and
infrastructural investments does carry some risk, the government has shown a certain
political capacity for longer-term action beyond immediate or electoral concerns.
This has been demonstrated in the areas of public security and the mobilization of
foreign investment. However, the effectiveness of implementing projects begun
under previous administration contrasts with the government’s capacity to prioritize
and organize its own policy measures. These tasks are a challenge for the government
of Luis Guillermo Solís and a matter of particular urgency, given the mounting
deficit. However, given the government’s weak position in Congress, efforts to
approve significant reforms, including fiscal ones, will encounter difficulties.
Despite government capacity to set and maintain strategic priorities, room for
implementation is quite limited. First, the main fiscal and debt metrics remain, as the
country has been unable to bring its deficit back to pre-2009 levels, and second, it is
highly unlikely that the economy will grow again at previous rates (from 2003-2007)
in the next five years, which would allow for increases in fiscal revenues. The country
has a rigid budgetary system in which 79% of total expenditures are committed to
covering constitutional and legal obligations. Adding to these obligations are debt
service, wages and transfers that must be paid. Together, they absorb 95% of the total
expenditures. Hence, only a 5.2% margin is left for implementing the government’s
own policies. According to the policy think tank Programa Estado de la Nación, this
situation ranks Costa Rica as the country with most inflexible spending among the
group of high human development nations in Latin America.
However, budgetary constraints are only part of the cause for delays and problems in
various areas of governance during the period under review. Within the public works
sector, for example, particularly infrastructure, there is budget underutilization and
limited capacity on behalf of project implementation units, deficiencies in
environmental regulations, and additional managerial limitations regarding the
application of concession and expropriation laws. All are highly relevant to tackling
the country’s crumbling infrastructure and issues associated with competitiveness
and growth.
The executive also confronts policy problems related to budgetary control of
autonomous institutions, which often split from the government’s general guidelines.
The Comptroller General formulates the guidelines and rules of the corresponding
institutions’ budgetary policy for further approval by the executive. However, since
2001, many relevant institutions including social security (CCSS), electricity and
telecommunications (ICE) and public universities have been excluded from its
competences. In this way, the executive lost a relevant mechanism for commanding
and controlling the financing aspects of these institutions.
Implementation
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BTI 2016 | Costa Rica
28
By the same token, during the 2013-2014 period, the Chinchilla administration
managed to have 71% of its proposed legislation approved, different from previous
periods when most approved legislation originated under earlier administrations,
mainly in the Arias-Sanchez period. Policies approved included legislation to
facilitate access to housing for young people and the middle classes, legislation to
institutionalize the continuity of programs targeting vulnerable populations, such as
the National Network for Child Care and Development (Red de Cuido), and
regulations for biomedical research and a narcotics law. While more laws were
passed than by previous administrations, some did not respond to national priorities,
or lacked provisions for adequate funding. These various elements contributed to
shortcomings in the implementation of the government’s electoral platform, as well
as in its long-term development strategy. Among the demands unattended to by the
Chinchilla administration was tax reform, which has become a major challenge for
the incoming government. The Solís administration aimed to introduce new revenue
measures by early 2015, though successful implementation will be difficult, and the
impact on the fiscal deficit insufficient to tackle the debt burden. Therefore, the
introduction of only gradual fiscal reforms is expected.
In developing policy responses, the government has usually relied on good practices,
international cooperation and expert advice. However, in other areas of governance,
the government has demonstrated limited flexibility and an inconsistent learning
process. An example of this behavior is the gap between the enactment of programs
containing expenditures and the creation of revenue sources to fund them. This is
particularly important for Costa Rica because in recent years the country has been
unable to replace failed policies, such as the fiscal reform, with innovative ones. As
pointed out by the policy think tank Programa Estado de la Nación, the systematic
decoupling of the state’s obligations from their fulfillment is one of the main
explanations for citizens’ discontent. However, there is a tendency to approve
legislation expanding state competences without new resources to make them
effective. Such is the case for the constitutional reform that increases the minimum
expenditure on education from 7% to 8% of the GDP as of 2014, or the mandate to
transfer at least 7% of income tax revenue to the Costa Rican child welfare authority
(PANI), despite lacking the corresponding fiscal basis to fulfill it. The situation is
aggravated by the current scenario of restricting public expenditure due to fiscal
deficit. Increasing state competences should be hand-in-hand with an economic
foundation for their correct implementation.
Policy learning
7
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29
15 | Resource Efficiency
Highly complex administrative structures stand in the way of efficient government
use of human and financial resources. The public sector is made up of more than 300
entities of diverse juridical and functional nature. The 19 ministries of the executive
are subdivided into 80 subunits with different degrees of financial and administrative
autonomy. This complicates efficient coordination, management and control.
Politicians and opinion leaders have repeatedly called for state organizational reform,
but it has been elusive. While municipalities manage increasing levels of resources,
they continue to be dependent on authorizations from the national legislature and
more often than not lack executive capacity. While the country has a long-established
civil service (created in 1951), it does not encompass all public sector employees and
its effectiveness varies across areas. In some cases, it provides for merit-based
professionalism, while in others it is a source of rigidity and constraint. Given the
practical impossibility of firing a civil service employee, many entities have devised
ways to hire around it, creating enclaves of variant dynamism within the state.
According to the Inter-American Bank, by the year 2013 Costa Rica was in the group
of Latin American countries with a medium level of civil service development. At
the same time, Costa Rica’s weak and rigid budgetary system situates it as the most
inflexible budget in the region. Despite the fact that the Costa Rican state is short of
funds, it collects most of its income from taxes and fees. However, low deviation of
actual budget expenditures from the planned budget ends up being at the expense of
public investment. Budget planning and implementation are transparent, but effective
auditing fails, particularly since public investment implementation is affected by
delays and corruption.
Efficient use of
assets
While the government can assemble diverse objectives into coherent policy, it does
not always do so, especially since the state apparatus is too unwieldy to allow for
simple implementation. Salient examples are provided by economic development and
environmental policies. In the 2011-2013 period, there were some concrete actions
to coordinate and integrate the public sector with regards to climate change actions.
These include the creation of an inter-ministerial council and a technical interministerial committee working on the definition of concrete measures to mitigate
climate change effects, later incorporated in the 2015-2018 National Development
Plan. However, there are other strategic areas where institutional coordination must
be improved, such as among the diverse areas that shape Costa Rican foreign policy
or in the promotion of territorial planning and rural development. For this to happen,
the Institute of Rural Development (INDER) has to coordinate with other institutions
that work on a regional level, including the Electricity and Telecommunications
Institute (ICE), the Transport and Public Works Ministry and the Ministry of
Planning, as well as with the rural development councils and other civil society
organizations. According to the policy think tank Programa Estado de la Nación,
these coordination problems stem from the inherent weaknesses of decision-making
Policy
coordination
7
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BTI 2016 | Costa Rica
30
mechanisms within a very complex legal and administrative structure that involves
multiple organizations with overlapping jurisdictions and redundant functions. While
there are institutional mechanisms such as the Ministry of the Presidency designed to
facilitate coordination with the legislature, it is at this level where the harmonization
of conflicting objectives has been most elusive. Increased party fragmentation and
polarization also make programmatic differences between government and the
opposition more likely, which further undermine policy coordination among
ministries and agencies.
Costa Rica has laws, regulations and penalties to combat corruption, though the
availability of resources required to enforce those laws has been limited. The country
has also ratified the Inter-American Convention Against Corruption and the U.N.
Convention Against Corruption, which obligate subscribing nations to implement
criminal sanctions for corruption. The Attorney General, State Litigator,
Ombudsman’s Office, and Organization of Judicial Investigation (OIJ) work in
conjunction with each other in an effort to combat corruption. The Comptroller
General exercises strict financial and administrative control over the multiple
organizations under its purview, as it is responsible for approving or rejecting public
contracts, auditing results, and detecting instances of corruption. In addition, most
entities have internal auditors who closely monitor their entities’ spending. On a
citizen level, the Constitutional Court has empowered individuals to contest
administrative action (or inaction) in every aspect of public service covered by the
constitution.
According to the Costa Rican Criminal Code, public officials convicted of receiving
bribes are subject to prison sentences of up to 10 years. Bribery scandals have been
exposed due to the coupled participation of mechanisms and agencies willing and
able to investigate and uncover acts of corruption, together with an assertive media
that is no longer timid about publishing stories linking public officials to corrupt acts.
Despite the trial and conviction of high-ranking politicians, public institution officials
and corporations, other important cases have been left unresolved as the institutions
that monitor and control accounts of corruption continue to suffer from inadequate
human and financial resources to attend to an ever-increasing and complex workload
which demands costly legal research. There is a generalized perception among
citizens that public officials are corrupt. The 2013 Latin America Public Opinion
survey reported that more respondents than previously identified corruption as the
most important problem (20%), surpassing even crime and unemployment.
In regards to the regulation of party financing, the Supreme Electoral Tribunal is
responsible for auditing political parties’ financing and holds them responsible for
receiving illegal contributions and for accepting donations from individuals that
exceed the legal limit; they must file monthly income reports during electoral periods
and quarterly reports during non-electoral periods. The 2009 Electoral Code
improved the sanctions regime by providing penal provisions a wider scope, which
complements the establishment of fines that the electoral body can impose.
Anti-corruption
policy
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31
16 | Consensus-Building
All major political actors agree on the goal of maintaining Costa Rica’s longstanding
and nearly consolidated democracy. Nevertheless, there is some deterioration in the
general public’s opinion. The Latinobarometro survey demonstrated a reduced level
of support for democracy (from 65% in 2011 to 53% in 2013). Public dissatisfaction
with social and political policies has become more evident in recent years,
manifesting in a variety of ways including an increasing number of public
demonstrations, politicians’ low popularity ratings and political fragmentation.
Demands reveal disagreement with specific policies and public administration
failures, as well as social disparity, rather than a broader questioning of democracy
or general development and transformation goals.
Consensus on goals
10
All major political actors also agree on the goal of consolidating a market economy
with significant social safeguards, and political dispute is merely concerning the
“right” politics to achieve these goals. As with democracy, however, the
Latinobarometro survey registered a hesitant approval of the market economy as the
only system for development (falling from 59% to 57% between 2011 and 2013).
Market-based competition has historically been contested by various organizations
and unions, especially in the electricity and telecommunications sectors. These
groups accuse the public comptroller of favoring transnational corporate interests,
but their power has been reduced as compared to other actors.
There are no anti-democratic veto actors with anti-democratic interests, such as the
military or influential economic actors. Some social movements oppose reform
through extra-parliamentary and sometimes contentious means, but not with antidemocratic intent.
Anti-democratic
actors
The dominant emergent cleavage is between those who benefit from the
socioeconomic order and those who feel excluded, as well as those who do not
consider themselves adequately represented and those who are disillusioned with
existing political institutions. Issues such as alleged corruption cases, same-sex
marriage, concessions to private companies, the informal transportation sector and
education-sector wages also generate conflict. Social protests of greater intensity
have raised new challenges to the institutional framework, which has had difficulties
in managing conflicts and responding to the demands of the population. However,
their resolution has been kept within institutional boundaries. There is no party or
movement seeking to depose the state. Cleavage-based conflict is prevented by the
political leadership’s ability to establish as broad a consensus as possible across
dividing lines. For example, it does this by addressing the most urgent popular
demands, while also incorporating the concerns of the private sector. Indeed, the
center-left ruling party is doing the same. All rights, including human rights, are
recognized throughout the country.
Cleavage /
conflict
management
10
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BTI 2016 | Costa Rica
The political leadership enables civil society participation in a large number of areas
and assigns an important role to many civil society actors in public discussions, but
also shows a tendency to engage in top-down agenda setting and policy formulation.
Enabling civil society is further impeded by a low level of citizen participation in any
form of organization, thus undermining their legitimacy. While there are a
considerable number of civic organizations, the degree to which individuals engage
with those organizations does not appear to be overwhelming, at least according to
opinion polls and in regional comparison.
32
Civil society
participation
8
Nevertheless, different spaces for and forms of civil society participation have been
formally created or have emerged through informal channels. When new laws are
enacted or existing laws reformed, it is typical for the organized representatives of
sectors affected by the laws to be given space to voice their concerns before
legislative committees. Some government policies, like those governing minimum
wages and salary increases, for example, are decided in consultation with the
organized representatives of workers or employers. There are also examples of
participatory policy-making at the local level, such as the formulation of County
Plans for Local Human Development, the constitution of citizen audits and some
exercising of participative budgets.
However, social movements that have emerged to oppose government policies in the
areas of electric power generation, telecommunications, trade, mining and public
works have received less attention by the government. Though the Chinchilla
administration met with members of some of these groups and listened to their views
and interests, the president did not always take them into account. In sum, there are
many areas where civil society participation could be enhanced, including
incorporating civil society into the assessment of the social and environmental
impacts of projects in the planning and development of zoning regulations.
The victory of the Citizen Action Party (PAC) is a result of this amalgamation of civil
society demands, and President Solís tries to enhance citizen participation.
The country has not experienced major historical injustices of the type covered by
this question.
Reconciliation
n/a
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33
17 | International Cooperation
In accordance with the principles of effective cooperation based on the OECD Paris
Declaration (2005), the Accra Agenda for Action (2008), and the Monterrey
Consensus (2002), Costa Rica makes good use of international support for its own
development agenda. This agenda, defined in the National Development Plan 20152018, harmonizes midterm actions with long-term orientation towards economic
growth and employment, poverty and inequality reduction together with
environmental sustainability, and pursues the achievement of the U.N. Millennium
Development Goals. The 2010-2013 period also witnessed 90% of the resources from
international cooperation partners concentrated in four priority sectors: environment
and energy (48.1%); public construction and transportation (21.7%); finances,
economy, and industry (13.9%); and health and social development (6.2%). As
pointed out by the Ministry of Planning, there is still room for improvement,
especially with regards to implementing a higher percentage of international
cooperation projects with less developed peripheral regions.
Effective use of
support
9
Costa Rica, like most Latin American countries, has been affected by declining levels
of official development assistance. In response to this situation, the country continues
to explore alternative frameworks, such as South-South cooperation and triangular
cooperation, exchanging successful experiences and good practices among countries
of similar or lower relative development or in partnership with developed countries.
Currently, the country has South-South cooperation programs with Latin American
countries like Mexico, Argentina, Chile, Uruguay, Peru and Colombia, as well as
triangular cooperation projects with Spain and Germany. More than financial
resources, these new modes of cooperation provide invaluable benefits in terms of
opportunities to learn from international know-how and experience exchange among
countries. However, Costa Rica does not yet manage a fund for South-South
cooperation that would leverage actions and technical cooperation projects among
developing countries. Moreover, other sources of development cooperation have
been gaining traction. Traditionally, multilateral cooperation has been more
dominant than bilateral cooperation, though the latter has come closer to the former
during the 2010-2013 period, to a great extent due to increased relations with China.
Costa Rica has traditionally exerted an outsized international influence with regard
to its physical and economic power. During 2013 and 2014, Costa Rica remained
engaged in the promotion of human rights, peace and democracy at international
forums. Together with trade and sustainable development, these issues also
dominated the agendas of diplomatic missions abroad. In this period, the country
stood as a leader in the Central American region by actively managing presidential
visits from three strategic trading and political partners. Bilaterally, Costa Rica has
prioritized approaching strategic partners to increase cooperation on infrastructure,
Credibility
10
BTI 2016 | Costa Rica
34
education and technology. As a central axis of its foreign policy, Costa Rica further
promoted its incorporation in the Organization for Economic Cooperation and
Development (OECD) and its full membership in the Pacific Alliance.
Overall, international cooperation resources (reimbursable and non-reimbursable)
reached a historical level during the 2010-2013 periods ($4,940 million), most
corresponding to external loans. The government has achieved a level of confidence
in attaining its reform policies with the international community. However, the
country received an investment downgrade rating by Moody’s in 2014 in response to
institutional failures in addressing Costa Rica’s growing fiscal deficits and debt.
According to Moody’s, the new Solis administration, which took office in May of
this year, has indicated it will only gradually introduce fiscal consolidation.
Costa Rica belongs to and supports regional and international integration
organizations. The country is an active participant in the Central American
Integration System (SICA) and, as a signatory of the Central America Free Trade
Agreement (CAFTA), is notably active in the Central American Secretariat for
Economic Integration. Political leadership is also engaged in different initiatives to
build and expand cooperation relationships and ties with regional neighbors. Most
recently, Costa Rica served as president pro tempore of CELAC, the Community of
Latin American and Caribbean States, and San José hosted CELAC’s 2015 Summit,
which focused on fighting extreme poverty in Latin America. In addition to
multilateral efforts, the country makes use of bilateral instruments to handle relations
with Panama and Nicaragua, such as the Cross-Border Cooperation Agreement
between Costa Rica and Panama to unite efforts against organized crime and poverty.
There is no such agreement between Costa Rica and Nicaragua, though there are
several bilateral commissions to promote cross-border development. Moreover,
together with the rest of SICA countries, the Central American Strategy for Rural
Territorial Development (ECADERT) was launched in 2010, aiming to create
opportunities for and to strengthen the capacities of rural populations, and to
transform their living conditions.
Efforts to strengthen ties with the rest of Central America have been obstructed by
the incursion of Nicaraguan troops along the northern border in 2010. Subsequent to
this event, relationships with this country have been marked by disputes before the
International Court of Justice in The Hague. Far from decreasing, tension between
the two countries has intensified due to environmental impacts caused by the
dredging of the San Juan River by the Nicaraguan government, its interest in
redefining territorial and maritime boundaries, and Nicaraguan President Daniel
Ortega mentioning the possibility of disputing the territories of the Costa Rican
province of Guanacaste. Lacking an army, Costa Rica is dependent on diplomacy to
foster amicable relations with its neighbors. However, these issues have generated
ample debate on how to confront what Costa Ricans consider an aggressive neighbor.
Regional
cooperation
9
BTI 2016 | Costa Rica
Strategic Outlook
Costa Rica must tackle its structural limitations in terms of transformation capacity. If the country
wants to maintain and deepen its significant accomplishments in the economic, social and political
realms, it will require a set of political measures to counteract inequality, create jobs and introduce
administrative reforms aimed at enhancing implementation capacity. During the period under
review (2013-2015), the country’s economy was managed so as to sustain macroeconomic
balances in terms of economic growth and low inflation, although at the expense of opportunity,
stability and solvency. Income distribution has reached historical levels of inequality (0.524,
according to the Gini coefficient), increasing governance constraints and social unrest. To
counteract the widening gap between rich and poor requires a new set of policies, including
increasing investment in infrastructure, education and social programs, as well as promoting hightech innovation and establishing a flexible regulatory framework for investments.
Moreover, the Solís government, which came to power pledging to boost competitiveness, create
jobs and attract investment, must also bring years of rising fiscal deficit under control. In 2014,
the central government’s deficit reached the highest level in the past 10 years (5.4% of GDP),
limiting its capacity to make urgently necessary social investments. In a scenario without fiscal
reform, the central government’s deficit and the overall public debt are projected to reach 8% and
58% of GDP, respectively, by 2019. One solution would be to raise taxes; however, various
unsuccessful attempts to pass fiscal reform over the last decade have faced congressional gridlock
and adverse constitutional court rulings.
The new composition of the legislative assembly is more fragmented than in the past, complicating
the approval of any tax reform. So, while enjoying the benefit of electoral support for its president,
the incoming government still needs several partners in parliament to secure majorities, something
extremely difficult to envisage under the present constellation of seats.
What is becoming evident is that the simplistic approach of previous administrations to economic
growth, macroeconomic stability, and opening up to international markets was insufficient to
generate human development and an acceptable distribution of wealth. The weakening of the
external sector, together with the fiscal crisis, force the introduction of profound modifications to
economic development policies in order to foster progress. One urgently needed strategic policies
is the maintenance and modernization of the country’s infrastructure projects, such as airports,
ports and roadways. Investments in these long-neglected areas have to keep pace with economic
growth, and need to be implemented under more effective and independent scrutiny than in the
past to ensure cost-effectiveness and competitiveness. In addition to concession contracts, other
financial arrangements should be integrated to facilitate investments, including strengthening
partnerships between government, universities, R&D and the private sector. Citizens’ demands for
participation must be considered in all policy strategies. It is necessary to formulate answers
through a profound and inclusive dialogue in order to build more plural and balanced results, with
the overriding objective of facilitating a more inclusive development style, reestablishing faith in
public politics and institutions and practicing a more participative approach to a common future.
35